Page 102 - RusRPTSept20

VTB Capital reminds. The first e-grocery rating in February 2020, put the overall market at RUB45bn for 2019 (0.3% of total food retail).
Russian supermarket chain Magnit beats expectations in 2Q20 IFRS results. Magnit reported 2Q20 IFRS & Trading Update. The company will conduct a conference call later today. Solid trading update of +7.2% y/y in LfL sales and improved efficiency resulted in good financials, including 4%/6.2% beat on EBITDA vs BCSe and cons-s and on net income by 17.8%/27.5% vs BCSe and consensus. Robust trading update (LfL sales up 7.2% y/y) together with improving efficiency, including gross margin by 58bps y/y and EBITDA margin by 73 bps allowed to beat the expectations by 4%/6.2% on EBITDA vs BCSe and cons-s and by 17.8%/27.5% on net income, which was supported by lower finance costs, FX gain and normalized tax rate.
§ LfL sales rose 7.2% in 2Q20 vs +7.8% in 1Q20, driven by decreased traffic (-14% y/y) and higher average basket (24.7% y/y)
§ Total revenue is 1.5% above BCSe and -0.7% below consensus, increasing 13.7% y/y due to +5.1% y/y in selling space and +7.2% in LfL sales
§ Gross Profit increased 16.5% y/y with a margin of 24.4% up 58bps y/y on improved commercial terms, lower promo activity in a combination with better promo coverage and higher promo margin, lower shrinkage and supply chain costs
§ EBITDA exceeded BCSe and consensus (+4% vs BCSe, +6.2% vs cons), growing 25.3% y/y, EBITDA margin was at 7.9% (vs 7.7% by BCSe and 7.4% by consensus) thanks to higher gross margin and reduced SG&A costs by 103 bps y/y to 20.4% of sales on lower marketing, depreciation, rent costs and positive operating leverage effect
§ Net income is well above expectations (+17.8% vs BCSe, +27.5% vs cons), showing +101.6% y/y and driven by the following factors: higher EBITDA, decreased net finance costs due to lower cost of debt at 6.3% (-130 bps y/y, -50 bps q/q); FX gain in the amount of RUB1bn related to direct import operations and normalized tax rate to 20.6%. Net income margin increased by 145 bps y/y to 3.3%
§ Capex reduced by 58% y/y on the back of decelerated redesign and expansion program
§ Net debt reduced by RUB4.8bn compared to March 31, 2020 and stood at RUB187.4bn as of June 30, 2020. Net Debt to EBITDA ratio was 2.0x as at 30 June 2020 vs 2.2x as at 31 March 2020.
§ FY20 guidance provided. The new plan is 600 organic store openings (vs previous 700) on net basis in 2020 (169 stores net have been already opened in 1H 2020). Capital expenditures projections for 2020 have been reduced to RUB45-50bn (vs previous RUB60-65bn) on lower investments in organic expansion and redesign while spending on efficiency projects focused on business development remains unchanged.
Russian children's store Detsky Mir reported lower margins and weak
102 RUSSIA Country Report September 2020 www.intellinews.com